The potential of organizations of fee-for-service physicians for achieving significant decreases in hospitalization.

Because hospitalization is a key factor in controlling health care costs and because fee-for-service remains the predominant mode of physician payment, a study was undertaken of the hospitalization experiences of open panel fee-for-service health maintenance organizations (IPA-HMOs) and Foundations for Medical Care (FMCs). Ten open panel plans were surveyed as to characteristics of their programs, physicians, and enrollees and their hospitalization rates. Although data were incomplete, three IPA-HMOs, described as case reports, did achieve striking reductions in hospital use relative to a comparison group or period. Salient characteristics of these plans that may influence hospital use are prepayment by enrollees, sharing by physicians of some financial risk, and effective peer review. Further study is needed, but preliminary indications are that IPA-HMOs have a role to play in reducing health care costs.